StuDocu is not sponsored or endorsed by any college or universityLecture notes - Case study - The Birth of Swatch - StrategyOrganization and MarketingStrategy Organization and Marketing (Politecnico di Torino)Downloaded by karthik sk ([email protected])lOMoARcPSD|2535112
The Birth of Swatch (marketng)“Why can’t we design a strinking , low cost, high quality watch and build it in Switzerland?”In 1993, Swatch was the best-selling watch in the history of the watch industry. The strategy was base on: vertical integration, decentralization marketing, and portfolio management. Industry BackgroundBefore 1950s: watch = jewelry, financial investment. Swiss dominated the watch industry (80% of the worlds total watch production). They were sold primarily through jewelers and upscale department stores, and watch repair was an ongoing source of revenue for these retailers. The Emergence of Low-Cost CompetitionIn 1951: US time introduced a line of disposable watches name TIMEX. The cost decrease thanks to mechanical movements that used hard alloy metals in place of jewels (this mechanism was burn in World War II). Main characteristics: 1. Very simply designed; 2. Cheap exterior materials that gives only a strictly functional appearance; 3. Could not be open so after sales repairs were impossible; 4. Really low price ($6.95-$7.95). Promotion: they use extensive television advertisingcomplains. Distribution channel: drugstores and discount houses. Jewelers were not interested in selling them because too low price and no after sale revenue. By 1970 Timex was selling more watches then any manufactures in the world and the Swiss share of the global market declined from 80% in 1946 to just 42% in 1970. The Introduction of Quartz Technology In 1970, the QUARTZ technology was introduced; this changed again the nature of competition. Quartz movements used an integrated circuit made up of numerous electronic components (equal accuracy to Swiss made mechanical watches). Advantages: 1. allowed for more sophisticated functionality e.g. provide the date and the day of the week; 2. their costs of production were constantly being driven down by chipmakers. By 1979, Hattori-Seiko was producing 22 million watches annually and had become the world’s largest watches company in terms of revenue. By 1984, more than tree-fourth of the watches sold around the world were based on quartz technology and by 1986 Citizen had become the overall global leader in both movement and finished watch production volumes.The Swiss Watch Industry in Free FallThe quartz technology defines the decline of Swiss watches. Swiss watchmakers had refused to embrace quartz based on the belief that electronic watches we unreliable, unsophisticated, and beneath Swiss quality standards. The Swiss watch industry was dominated by two companies: 1. ASUGAG consisting of 100 separate companies and 2. SSIH private watch company. Both of there companies were losing millions of dollars, and Switzerland’s unit share of the world watch market had fallen to less then15%.